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Bank Regulation, Risk Management, and Compliance : Theory, Practice, and Key Problem Areas.

By: Material type: TextTextSeries: Practical Finance and Banking GuidesPublisher: Oxford : Informa Law, 2019Copyright date: ©2020Edition: 1st edDescription: 1 online resource (341 pages)Content type:
  • text
Media type:
  • computer
Carrier type:
  • online resource
ISBN:
  • 9781000702514
Subject(s): Genre/Form: Additional physical formats: Print version:: Bank Regulation, Risk Management, and ComplianceDDC classification:
  • 346.73/082
LOC classification:
  • KF974 .D55
Online resources:
Contents:
Cover -- Half Title -- Series -- Title -- Copyright -- Dedication -- Contents -- List of figures -- List of tables -- List of abbreviations -- Table of legal sources -- Note about the author -- Acknowledgments -- Introduction -- A transformation of governing assumptions -- Themes in bank regulation and banks' internal governance -- 1 Cooptation of corporate governance -- 2 Tensions between banks' business models and regulatory mandates -- 3 Flexibility and broad variety of means in conveying regulatory expectations -- Contribution to the literature and intended readership -- Book overview -- Part I -- Part II -- Part I Foundations -- Chapter 1 The banking business model and rise of the financial conglomerate -- 1.1 Introductory overview -- 1.2 Factors that cause banks to be so highly regulated -- 1.2.1 Intensity of regulation a function of banks' central role in the economy -- 1.2.2 Regulation a function of risks inherent in the banking business model -- 1.2.3 Risk management and compliance a function of the government safety net -- 1.2.4 GFC's pervasive impact on global banking regulation -- 1.3 The rise of the global financial conglomerate and BHC structure -- 1.3.1 The securitization 'originate-and-distribute' model -- 1.3.2 Deregulation and emergence of the BHC structure -- 1.3.3 Increasing complexity, interconnectedness, and size of BHCs -- 1.4 Conclusion -- Chapter 2 The bank regulatory framework and formation and conveyance of regulatory expectations -- 2.1 Introductory overview -- 2.2 The regulatory and supervisory structure and its implications for risk management and compliance -- 2.2.1 BCBS: history and function -- 2.2.2 Roles of regulation, supervision, and compliance in achieving the three regulatory objectives -- 2.2.3 Bank supervisory structures -- 2.2.4 Critiques of the four supervisory structures: lessons of the GFC.
2.2.5 Impact of supervisory structure on firms' risk-return analysis of risk management and compliance functions -- 2.3 US regulatory and supervisory framework -- 2.3.1 Structure of US banking agency regulation and supervisory oversight -- 2.3.2 Obsolescence of US supervisory structure -- 2.3.3 Compliance cost and inherent compliance risk under US structure -- 2.4 UK regulatory and supervisory framework -- 2.4.1 Failure of UK's unified structure -- 2.4.2 Conversion to twin-peaks structure -- 2.4.3 Compliance cost and inherent compliance risk under UK structure -- 2.5 EU regulatory and supervisory framework -- 2.5.1 Compliance cost and inherent compliance risk under EU regulatory framework -- 2.6 Conveying regulatory expectations: rules-based and principles-based approaches -- 2.6.1 Issues of theory and policy -- 2.6.2 Rules-principles classification of the four areas of banking regulation -- 2.7 Supervisory tools for conveying regulatory expectations -- 2.7.1 Bank examinations -- 2.7.2 Sliding scale of increasing strictness of supervisory actions -- 2.7.3 Pyramid of regulatory expectations -- 2.8 Conclusion -- Chapter 3 Managing banks' risks through a corporate governance framework -- 3.1 Introductory overview -- 3.2 A corporate governance primer -- 3.2.1 Core components of a corporate governance system -- 3.3 Corporate governance issues unique to banks and other financial institutions -- 3.3.1 Special governance issues involving boards of BHCs and bank subsidiaries -- 3.3.2 Managing conflicts of interests in financial institutions -- 3.4 The role of the three control functions in bank corporate governance -- 3.4.1 Reporting structure of the three control functions -- 3.4.2 The 3LOD model -- 3.5 The bank compliance function -- 3.5.1 Role of compliance in addressing the principal-agent problem -- 3.5.2 Compliance risk-return optimization.
3.5.3 Interrelationship between risk management and compliance -- 3.6 Formative impact of state law and federal prosecutorial policy on compliance -- 3.6.1 Role of Delaware judiciary in incentivizing firms to establish compliance programs -- 3.6.2 Role of USSG and prosecutorial policy in creating compliance obligations -- 3.7 The bank risk management function -- 3.7.1 Corporate governance framework for risk management -- 3.7.2 Technical components of risk management -- 3.7.3 Enterprise risk management: COSO and ISO -- 3.8 Role of corporate culture in bank risk management and compliance -- 3.8.1 Historical trends and other explanatory factors in financial firms' culture -- 3.9 Conclusion -- Part II Primary areas of bank regulation and internal governance -- Chapter 4 The role of risk management and compliance in micro-prudential capital regulation -- 4.1 Introductory overview -- 4.2 Overview of bank capital, leverage, and capital adequacy requirements -- 4.2.1 Economic capital, regulatory capital, and leverage -- 4.2.2 Factors contributing to the amount of capital on banks' balance sheet -- 4.2.3 Rationales for capital adequacy regulation -- 4.3 Prescriptive micro-prudential regulation and compliance -- 4.3.1 Historical evolution of prudential regulation -- 4.3.2 Overarching objectives of Basel capital regulation and regulatory philosophy -- 4.3.3 Overview of Basel III's risk-weighted capital adequacy methodology -- 4.3.4 Basel III's RWA framework: regulatory capital (numerator) -- 4.3.5 Overview of Basel III's risk-based framework: RWA (denominator) -- 4.3.6 Credit risk RWA capital requirements -- 4.3.7 Market risk RWA capital requirements -- 4.3.8 Leverage ratio requirements -- 4.3.9 Non-capital adequacy-based restrictions -- 4.4 Conclusion -- Chapter 5 The role of risk management and compliance in micro-prudential oversight.
5.1 Introductory overview -- 5.2 General overview of Pillar II bank supervision -- 5.2.1 Rationales for bank supervision -- 5.2.2 Capital: focus of supervisory review for all banks -- 5.2.3 Scope and nature of bank supervision through examinations -- 5.2.4 Graduated escalation of supervisory actions -- 5.3 Statutory and regulatory foundation of safety and soundness oversight -- 5.3.1 Banks as 'going' and 'gone' concerns -- 5.3.2 What is 'safety and soundness'? -- 5.3.3 Section 39 of the Federal Deposit Insurance Act -- 5.3.4 Interagency guidelines under Section 39: Operational and Managerial Standards -- 5.3.5 Safety and soundness finding as prudential backstop for Pillar I rules -- 5.4 The CAMELS rating system -- 5.4.1 Purpose and mechanics of CAMELS rating system -- 5.4.2 Enforcement consequences of a low CAMELS rating -- 5.4.3 Importance of management quality in CAMELS rating system -- 5.4.4 Elements of each CAMELS ratings component -- 5.5 Prompt Corrective Action program -- 5.5.1 PCA program's 'tripwire' approach -- 5.6 Conclusion -- Chapter 6 The role of corporate governance in macro-prudential regulation of systemic risk -- 6.1 Introductory overview -- 6.2 The role of the GFC in the formulation of macro-prudential regulation -- 6.2.1 Definitions and concepts -- 6.2.2 Too big to fail -- 6.2.3 Shadow banking and bank runs -- 6.2.4 Regulatory responses to risks revealed in GFC's three phases -- 6.2.5 Phase I: corporate governance and risk management failures reflected in banks' capital structure -- 6.2.6 Phase II: liquidity and credit crisis -- 6.2.7 Phase III: the Great Recession -- 6.2.8 Regulators' lessons from the GFC and their macro-prudential response -- 6.3 Risk management and compliance expectations for large BHCs -- 6.3.1 FRB guidance on large BHCs' board effectiveness.
6.3.2 FRB guidance on senior and business line management of large BHCs -- 6.3.3 FRB guidance on risk management and other control functions -- 6.3.4 Board risk committee requirements for large BHCs -- 6.3.5 Regulatory expectations for risk data aggregation and risk reporting -- 6.3.6 Supervisory regime for LISCC firms and other large, complex BHCs -- 6.4 Conclusion -- Chapter 7 The capital solution to systemic risk: Risk management and compliance implications -- 7.1 Introductory overview -- 7.2 Additional capital requirements for systemically important BHCs -- 7.2.1 CCyB -- 7.2.2 G-SIB surcharge -- 7.2.3 Supplementary leverage ratios and enhanced SLRs -- 7.3 Liquidity regulation -- 7.3.1 Liquidity regulation's twofold approach -- 7.3.2 Liquidity regulation risk management and compliance -- 7.4 Pillar II stress testing programs -- 7.4.1 Overview of CCAR and DFAST -- 7.4.2 CCAR -- 7.4.3 DFAST -- 7.4.4 Risk management and compliance expectations under CCAR and DFAST -- 7.5 Model risk management under CCAR -- 7.5.1 Background and context -- 7.5.2 Applying principles of MRM -- 7.6 Conclusion -- Chapter 8 The structural solution to systemic risk: Risk management and compliance implications -- 8.1 Introductory overview -- 8.2 Ex post approach: SPOE, OLA, and resolution plans -- 8.2.1 SPOE and TLAC -- 8.2.2 OLA -- 8.2.3 Resolution plans ('living wills') -- 8.3 Ex ante approach: reducing the impact of risky activities -- 8.3.1 Eliminating risky activities and businesses: the Volcker rule -- 8.3.2 Volcker compliance requirements -- 8.3.3 UK's ringfencing of risky activities and businesses -- 8.4 Conclusion -- Chapter 9 The role of risk management and compliance in consumer protection regulation -- 9.1 Introductory overview -- 9.2 Overview of compliance risk in financial consumer services.
9.2.1 Factors creating unique compliance risks in banking consumer protection.
Summary: Bank Regulation, Risk Management, and Compliance is a concise yet comprehensive treatment of the primary areas of US banking regulation - micro-prudential, macro-prudential, financial consumer protection, and AML/CFT regulation - and their associated risk management and compliance systems.
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Cover -- Half Title -- Series -- Title -- Copyright -- Dedication -- Contents -- List of figures -- List of tables -- List of abbreviations -- Table of legal sources -- Note about the author -- Acknowledgments -- Introduction -- A transformation of governing assumptions -- Themes in bank regulation and banks' internal governance -- 1 Cooptation of corporate governance -- 2 Tensions between banks' business models and regulatory mandates -- 3 Flexibility and broad variety of means in conveying regulatory expectations -- Contribution to the literature and intended readership -- Book overview -- Part I -- Part II -- Part I Foundations -- Chapter 1 The banking business model and rise of the financial conglomerate -- 1.1 Introductory overview -- 1.2 Factors that cause banks to be so highly regulated -- 1.2.1 Intensity of regulation a function of banks' central role in the economy -- 1.2.2 Regulation a function of risks inherent in the banking business model -- 1.2.3 Risk management and compliance a function of the government safety net -- 1.2.4 GFC's pervasive impact on global banking regulation -- 1.3 The rise of the global financial conglomerate and BHC structure -- 1.3.1 The securitization 'originate-and-distribute' model -- 1.3.2 Deregulation and emergence of the BHC structure -- 1.3.3 Increasing complexity, interconnectedness, and size of BHCs -- 1.4 Conclusion -- Chapter 2 The bank regulatory framework and formation and conveyance of regulatory expectations -- 2.1 Introductory overview -- 2.2 The regulatory and supervisory structure and its implications for risk management and compliance -- 2.2.1 BCBS: history and function -- 2.2.2 Roles of regulation, supervision, and compliance in achieving the three regulatory objectives -- 2.2.3 Bank supervisory structures -- 2.2.4 Critiques of the four supervisory structures: lessons of the GFC.

2.2.5 Impact of supervisory structure on firms' risk-return analysis of risk management and compliance functions -- 2.3 US regulatory and supervisory framework -- 2.3.1 Structure of US banking agency regulation and supervisory oversight -- 2.3.2 Obsolescence of US supervisory structure -- 2.3.3 Compliance cost and inherent compliance risk under US structure -- 2.4 UK regulatory and supervisory framework -- 2.4.1 Failure of UK's unified structure -- 2.4.2 Conversion to twin-peaks structure -- 2.4.3 Compliance cost and inherent compliance risk under UK structure -- 2.5 EU regulatory and supervisory framework -- 2.5.1 Compliance cost and inherent compliance risk under EU regulatory framework -- 2.6 Conveying regulatory expectations: rules-based and principles-based approaches -- 2.6.1 Issues of theory and policy -- 2.6.2 Rules-principles classification of the four areas of banking regulation -- 2.7 Supervisory tools for conveying regulatory expectations -- 2.7.1 Bank examinations -- 2.7.2 Sliding scale of increasing strictness of supervisory actions -- 2.7.3 Pyramid of regulatory expectations -- 2.8 Conclusion -- Chapter 3 Managing banks' risks through a corporate governance framework -- 3.1 Introductory overview -- 3.2 A corporate governance primer -- 3.2.1 Core components of a corporate governance system -- 3.3 Corporate governance issues unique to banks and other financial institutions -- 3.3.1 Special governance issues involving boards of BHCs and bank subsidiaries -- 3.3.2 Managing conflicts of interests in financial institutions -- 3.4 The role of the three control functions in bank corporate governance -- 3.4.1 Reporting structure of the three control functions -- 3.4.2 The 3LOD model -- 3.5 The bank compliance function -- 3.5.1 Role of compliance in addressing the principal-agent problem -- 3.5.2 Compliance risk-return optimization.

3.5.3 Interrelationship between risk management and compliance -- 3.6 Formative impact of state law and federal prosecutorial policy on compliance -- 3.6.1 Role of Delaware judiciary in incentivizing firms to establish compliance programs -- 3.6.2 Role of USSG and prosecutorial policy in creating compliance obligations -- 3.7 The bank risk management function -- 3.7.1 Corporate governance framework for risk management -- 3.7.2 Technical components of risk management -- 3.7.3 Enterprise risk management: COSO and ISO -- 3.8 Role of corporate culture in bank risk management and compliance -- 3.8.1 Historical trends and other explanatory factors in financial firms' culture -- 3.9 Conclusion -- Part II Primary areas of bank regulation and internal governance -- Chapter 4 The role of risk management and compliance in micro-prudential capital regulation -- 4.1 Introductory overview -- 4.2 Overview of bank capital, leverage, and capital adequacy requirements -- 4.2.1 Economic capital, regulatory capital, and leverage -- 4.2.2 Factors contributing to the amount of capital on banks' balance sheet -- 4.2.3 Rationales for capital adequacy regulation -- 4.3 Prescriptive micro-prudential regulation and compliance -- 4.3.1 Historical evolution of prudential regulation -- 4.3.2 Overarching objectives of Basel capital regulation and regulatory philosophy -- 4.3.3 Overview of Basel III's risk-weighted capital adequacy methodology -- 4.3.4 Basel III's RWA framework: regulatory capital (numerator) -- 4.3.5 Overview of Basel III's risk-based framework: RWA (denominator) -- 4.3.6 Credit risk RWA capital requirements -- 4.3.7 Market risk RWA capital requirements -- 4.3.8 Leverage ratio requirements -- 4.3.9 Non-capital adequacy-based restrictions -- 4.4 Conclusion -- Chapter 5 The role of risk management and compliance in micro-prudential oversight.

5.1 Introductory overview -- 5.2 General overview of Pillar II bank supervision -- 5.2.1 Rationales for bank supervision -- 5.2.2 Capital: focus of supervisory review for all banks -- 5.2.3 Scope and nature of bank supervision through examinations -- 5.2.4 Graduated escalation of supervisory actions -- 5.3 Statutory and regulatory foundation of safety and soundness oversight -- 5.3.1 Banks as 'going' and 'gone' concerns -- 5.3.2 What is 'safety and soundness'? -- 5.3.3 Section 39 of the Federal Deposit Insurance Act -- 5.3.4 Interagency guidelines under Section 39: Operational and Managerial Standards -- 5.3.5 Safety and soundness finding as prudential backstop for Pillar I rules -- 5.4 The CAMELS rating system -- 5.4.1 Purpose and mechanics of CAMELS rating system -- 5.4.2 Enforcement consequences of a low CAMELS rating -- 5.4.3 Importance of management quality in CAMELS rating system -- 5.4.4 Elements of each CAMELS ratings component -- 5.5 Prompt Corrective Action program -- 5.5.1 PCA program's 'tripwire' approach -- 5.6 Conclusion -- Chapter 6 The role of corporate governance in macro-prudential regulation of systemic risk -- 6.1 Introductory overview -- 6.2 The role of the GFC in the formulation of macro-prudential regulation -- 6.2.1 Definitions and concepts -- 6.2.2 Too big to fail -- 6.2.3 Shadow banking and bank runs -- 6.2.4 Regulatory responses to risks revealed in GFC's three phases -- 6.2.5 Phase I: corporate governance and risk management failures reflected in banks' capital structure -- 6.2.6 Phase II: liquidity and credit crisis -- 6.2.7 Phase III: the Great Recession -- 6.2.8 Regulators' lessons from the GFC and their macro-prudential response -- 6.3 Risk management and compliance expectations for large BHCs -- 6.3.1 FRB guidance on large BHCs' board effectiveness.

6.3.2 FRB guidance on senior and business line management of large BHCs -- 6.3.3 FRB guidance on risk management and other control functions -- 6.3.4 Board risk committee requirements for large BHCs -- 6.3.5 Regulatory expectations for risk data aggregation and risk reporting -- 6.3.6 Supervisory regime for LISCC firms and other large, complex BHCs -- 6.4 Conclusion -- Chapter 7 The capital solution to systemic risk: Risk management and compliance implications -- 7.1 Introductory overview -- 7.2 Additional capital requirements for systemically important BHCs -- 7.2.1 CCyB -- 7.2.2 G-SIB surcharge -- 7.2.3 Supplementary leverage ratios and enhanced SLRs -- 7.3 Liquidity regulation -- 7.3.1 Liquidity regulation's twofold approach -- 7.3.2 Liquidity regulation risk management and compliance -- 7.4 Pillar II stress testing programs -- 7.4.1 Overview of CCAR and DFAST -- 7.4.2 CCAR -- 7.4.3 DFAST -- 7.4.4 Risk management and compliance expectations under CCAR and DFAST -- 7.5 Model risk management under CCAR -- 7.5.1 Background and context -- 7.5.2 Applying principles of MRM -- 7.6 Conclusion -- Chapter 8 The structural solution to systemic risk: Risk management and compliance implications -- 8.1 Introductory overview -- 8.2 Ex post approach: SPOE, OLA, and resolution plans -- 8.2.1 SPOE and TLAC -- 8.2.2 OLA -- 8.2.3 Resolution plans ('living wills') -- 8.3 Ex ante approach: reducing the impact of risky activities -- 8.3.1 Eliminating risky activities and businesses: the Volcker rule -- 8.3.2 Volcker compliance requirements -- 8.3.3 UK's ringfencing of risky activities and businesses -- 8.4 Conclusion -- Chapter 9 The role of risk management and compliance in consumer protection regulation -- 9.1 Introductory overview -- 9.2 Overview of compliance risk in financial consumer services.

9.2.1 Factors creating unique compliance risks in banking consumer protection.

Bank Regulation, Risk Management, and Compliance is a concise yet comprehensive treatment of the primary areas of US banking regulation - micro-prudential, macro-prudential, financial consumer protection, and AML/CFT regulation - and their associated risk management and compliance systems.

Description based on publisher supplied metadata and other sources.

Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2024. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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